Randomization with Asymmetric Information a Simplified Exposition
A series of recent papers investigated the desirability of randomization of insurance contracts in the presence of moral hazard. All treat a continuum of possible outcomes, which tends to obscure the intuition. In this paper, we treat the two-outcome case, employing derivations which highlight the intuition. We also discuss randomization with adverse selection.
Year of publication: |
1985
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Authors: | Arnott, Richard ; Stiglitz, Joseph E. |
Institutions: | Economics Department, Queen's University |
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